When word got out that the Lyon-Martin Health Services clinic faced imminent closure, Luette Chavez's cell phone started ringing off the hook. Her friends were going into panic mode.

"It's shocking to think that something that's so important to so many people could just be lost so easily," Chavez told us. The clinic serves nearly 2,500 patients, regardless of their ability to pay for health care. It offers specialized services for queer women and transgender people, providing everything from primary care to mental health services to hormone treatment. A Hurricane Katrina survivor, medical school student, and part-time sex worker, Chavez volunteers at the clinic and relies on it for health care. Her dream is to someday start a free clinic in New Orleans that is cast in the mold of Lyon-Martin. But for now, all of her energy is consumed with the widespread effort to raise enough money to keep the clinic afloat. To survive, Lyon-Martin must pay off a $250,000 debt immediately.

CASH FLOW PROBLEM

As one volunteer among many, Chavez has adopted the mindset that failure is not an option. "I have absolutely every confidence that we will be able to save it ourselves because we're running ourselves into the ground doing it," she said.

Lyon-Martin's board of directors initially voted to shut down the clinic at the close of business Jan. 27, citing insurmountable financial problems. That decision was rescinded, however, following an emergency meeting held at the LGBT Center shortly after news of its pending closure went viral. By Jan. 28, an emergency fund drive had netted close to $100,000 in pledges and cash donations. A fundraiser held Jan. 30 at El Rio drew nearly 700 supporters and roped in another $28,000.

Despite the outpouring of support, the long-term future of the 30-year-old clinic remains uncertain. Lyon-Martin can restructure and avoid shutdown if it manages to clear the $250,000 urgently owed, but it must find $500,000 to continue operating in the same capacity as it has. It has stopped accepting new patients, but will likely be able to serve current patients until at least the end of February.

"Without Lyon-Martin, a community that is historically marginalized won't have anywhere to turn," stated an open letter to supporters from Board Chair Lauren Winter, who was unavailable for comment.

A combination of state funding cuts, increased demand, and poor financial management created a perfect storm for Lyon-Martin. A key source of the trouble was that the clinic had not been keeping up with its billing, and after a certain amount of time, it could no longer claim reimbursements from Medi-Cal. Yet external factors such as state and local budget cuts contributed to the problem, too, and Lyon-Martin is not alone in that respect.

All across San Francisco, community clinics that serve low-income and uninsured people are struggling to do more with less. Jim Illig, president of the San Francisco Health Commission, told us that he knows of several other clinics in dire financial straits.

"There are a lot of clinics on the edge because they have dedicated their mission to serving the uninsured," he said. "Any nonprofit clinic that you see — they're struggling." The Haight Ashbury Free Clinics, another nonprofit healthcare organization serving the uninsured, recently announced a merger with Walden House, a substance-abuse treatment center. The merger allowed the venerable health-care nonprofit to continue offering services after its budget was slashed by 50 percent due to reduced support from the city's General Fund. Even as the cuts took effect, demand for the free clinic's services rose 10 percent from 2009 to 2010.

"Every time I look into the waiting room, it's full," said Jeff Schindler, chief development officer.